Michael Kors To Close Up To 125 Stores Despite Strong China Market

The American sportswear fashion label Michael Kors reported an 11.2 percent loss of total revenue (to $1.6 billion) in the fourth quarter of fiscal year 2017 despite new store openings, according to a public statement released on May 31. Acquisition of the previously licensed operation in the Greater China region drove up retail net sales by 0.5 percent to $575.3 million.

For the past quarter, the brand has experienced highly uneven growth in different geographic regions. On a reported basis, the company’s total revenue in Asia jumped up 96.3 percent to $128.6 million, but its progress was undermined by a huge drop in the American market, which saw revenue decrease by 18 percent to $721.0 million, along with the weakness in Europe where revenue fell 15.3 percent to $215.2 million dollars.

“Fiscal 2017 was a challenging year, as we continued to operate in a difficult retail environment with elevated promotional levels,” said John Idol, the Chief Executive Officer (CEO) of the firm, in a public statement.

Over the past year, the luxury retail sector in the United States and Europe has been broadly hit by a number of factors including terrorism, slowing economy and political uncertainty following Brexit and the Trump presidency. In addition, “deep discounts at department stores and competitors” in the industry have also caused the brand’s profitability to peter.  

In order to improve profitability and lower the costs of depreciation and amortization associated with infrastructure, the company decided to close down about 100 to 125 full-price retail stores in the next two years, which it expects to optimize its store fleet and result in an annual saving of $60 million.

Idol also recognizes the need to further work on product innovation and enhance the store experience (both on and offline) to better serve its increasingly sophisticated customers.

“Looking ahead,” said Idol, “as we expand the fashion innovation in our accessories assortments, right-size our store fleet and elevate our store experience, fiscal 2018 will be a transition year in which we establish a new baseline before returning to long-term growth.”

The brand anticipates its total revenue to reach around $910 to $930 million for the current quarter, and to be approximately $4.25 billion for the overall fiscal year 2018. 

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